Once you find a property you like, it's crucial to establish clear parameters of an 'Offer to Purchase' in consultation with a Real Estate Professional. This includes determining a realistic price range, your bottom line, acceptable conditions, and favourable terms. Armed with this information, your Real Estate Professional will leverage their expertise to negotiate an agreement that aligns with your objectives.
The 'Offer to Purchase' is a legally binding document (once its signed by both parties) outlines the terms and conditions of the sale, including crucial details such as:
- Buyer and seller information,
- Legal and property addresses.
- Purchase price and inclusions/exclusions.
- List of chattels included in the sale
- Deposit amount
- Condition removal and Possession dates.
- Conditions of the sale, such as home inspection and mortgage approval.
- Any Terms the seller and buyer agree to
- Offer expiration timeframe.
Ensure you thoroughly review and understand the offer. Address any concerns or ambiguities before signing to avoid potential repercussions.
Offer Strategies:
Your approach to presenting an offer can vary depending on market conditions and personal preferences:
- Low Offer: Consider offering significantly below the asking price, especially if the seller is motivated. Be prepared for potential negotiation or rejection.
- Best Offer: If deeply interested in a property, submit your highest offer upfront to stand out, particularly in competitive markets.
- Multiple Offers: In a seller's market with multiple offers, strategically increase your bid to remain competitive.
Conditional Offers:
Normally an offer will be conditional. Conditions are items inserted into the contract that all you as a buyer to satisfy any questions you or your lender may have about a property before you go to SOLD status. Conditions are usually put in place for 2 weeks.
Here is a list of items that you can include as a condition:
- Financing: even though you have been pre-approved the lender needs to ensure that they have enough value and may order an appraisal. You also need the lender to approve your mortgage. Only then can you sign off on this condition.
- Property Inspection: it is recommended (even for a cash sale) to have the property inspected by a certified property inspector. This a physical audit of your new home and provides you with information and maintenance recommendations. Once you reveiw the report and are satisfied you can sign off on this condition.
- Review of Condo Docs: if you are buying a resort property you need to examine the documentation that runs the complex.
- Water Quality: if your property water supply is a drilled well or cistern you may be required by your lender to provide a water quality test result. This measures the presence bacteria and ecoli in your water supply. This test can be completed by your inspector.
- Septic System: Your lake property will have a system to collect sewage. This can be a holding tank, a tank and field, or a tank and discharge. Depending on the age of the property you may wish to have an additional inspection done. This is an additional cost approx $800.
- Rural Property Schedule: this is a document that deals with the utilities and access to your property. If you are buying vacant land in or out of a subdivision this information is vital to you making an informed decision.
- Sale of Buyers Property: you may have to sell a property to have the funds in place to purchase your new property. This is a condition to the sale. The seller can accept this condition with a 'shotgun clause.' This clause can be enforced by the seller if they receive another offer (normally 48-72 hrs).
Your offer may contain one, several, or all of these conditions.
Offer Terms:
Terms are outcomes that the buyer and seller agree to that are not conditional. Some examples of terms are as follows:
- Seller may wish to offer Title Insurance in lieu of providing a Real Property Report and Compliance
- Seller and buyer agree to provide compensation to the real estate agent bringing the deal if compensation isn't disclosed.
- Buyer may want the septic tank cleaned out, the furnace cleaned, the home cleaned, certain repair's completed, along with other items.
The terms will have a 'proof of completion' component and will be part of the the closing process with the lawyers.
Negotiations:
Upon receiving your offer, the seller may accept, reject, or counter it based on their preferences. Negotiations will continue until both parties reach an agreement on terms and conditions. Once both parties agree and sign the 'Offer to Purchase' the property becomes PENDING. During the pending period the buyer works to satisfy conditions, secure the transaction with a deposit, and proceed with closing arrangements.
Deposit Details:
Once the property is pending you are required to make a deposit. Typically it's a small percentage of the purchase price, to demonstrate commitment to the transaction. This amount is credited towards the purchase upon closing or refunded if you do not proceed with the sale.
By navigating the offer process thoughtfully and leveraging expert guidance, you'll maximize your chances of securing your desired home on favourable terms.